Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards - Plain language drafting – Standard clauses

[1] Section 156(2)(a) of the Fair Work Act 2009 (Cth) (the Act) requires the Commission to review all modern awards every four years (the Review). As a part of the Review this Full Bench has been constituted to oversee a number of plain language projects including the review of standard modern award clauses.

[2] We are in the process of redrafting a number of clauses in modern awards which have been identified as ‘standard clauses’. 1 One of the standard clauses deals with Termination of Employment (Clause E).

[3] The proposed standard clause E.1 as set out in a statement of 21 August 2017 2 (the August statement) as follows:

‘E. Termination of employment

NOTE: The National Employment Standards set NES sets out requirements for notice of termination by an employer. See sections 117 and 123 of the Act.

E.1 Notice of termination by an employee

(a) An employee must give the employer written notice of termination in accordance with Table X—Period of notice of at least the period specified in column 2 according to the period of continuous service of the employee specified in column 1.

Table X—Period of notice

NOTE: The notice of termination required to be given by an employee is the same as that required of an employer except that the employee does not have to give additional notice based on the age of the employee.

(b) In paragraph (a) continuous service has the same meaning as in section 117 of the Act.

(c) If an employee fails to give the period of notice required under paragraph (a), the employer may deduct from any money due to the employee on termination (under this award or the National Employment Standards NES), an amount not exceeding the amount that the employee would have been paid in respect of the period of notice not given.’

[4] During a hearing on 21 August 2017 we raised whether clause E.1(c) is a type of provision which may validly be included in a modern award and whether such a provision is necessary to achieve the modern awards objective.

[5] In a Statement 3 issued on 21 August 2017 (August Statement) we raised two issues in relation to Clause E.1(c):

‘(1) whether Clause E.1(c), either wholly or insofar as it deals with NES entitlements, is a type of provision which may validly be included in a modern award under the relevant provisions of the FW Act, including but not confined to ss.55, 118, 139 and 142; and

(2) to the extent that the Commission has the power to include a provision of the nature of Clause E.1(c) in a modern award, whether as a matter of merit such a provision is necessary to achieve the modern awards objective in accordance with the requirement in s.138.’

[6] These matters were the subject of a decision by this Full Bench on 18 October 2017. 4 In that decision we expressed a number of provisional views in respect of Clause E.1(a) and invited further submissions in respect of these issues. A copy of the directions in respect of the filing of those submissions is attached.

[7] It is important to note that most modern awards include a standard term requiring employees to give their employer notice of termination and, in the absence of such notice, the employer may deduct from any money due to the employee on termination the amount that the employee would have been paid in respect of the period of notice not given.

[8] The proceedings before the Plain Language Full Bench in respect of this issue may have implications for all modern awards and may result in the amendment or removal of an employer’s current right to make a deduction from an employees’ termination payment. Interested parties are encouraged to make submissions in accordance with the attached directions.

PRESIDENT

Fair Work Act 2009
s.156 - 4 yearly review of modern awards

[1] Further to the Decision issued on 18 October 2017 5 we are seeking further submissions from interested parties in respect of two issues:

1. Whether Clause E.1(c) is incidental to a term permitted to be in a modern award and essential for the purpose of making the permitted term operate in a practical way (see s.142(1)(a) and (b)).

2. Whether Clause E.1(c) is a term which must not be included in a modern award as the term has no effect because of s.326(1) and (4). (see s.151)

[2] Such submissions should address the following issues:

(i) The scope of Clause E.1(a), having regard to the terms of s.123.

(ii) The provisional view that the word ‘written’ be deleted from Clause E.1(a).

(iii) The provisional view that, in order to address some uncertainty about the interaction with the NES, Clause E.1(c) be amended to confine the scope of the capacity to make a deduction to ‘wages due to the employee.’

(iv) The provisional view that deductions pursuant to Clause E.1(c) would have no effect in relation to employees under 18 years of age, because of s.326(4), and hence in its current form it is a term that must not be included in a modern award, because of s.151(c).

(v) The provisional view that Clause E.1(c) is incidental to a permitted term, namely Clause E.1(a).

(vi) Is Clause E.1(c) essential for the purpose of making a permitted term (Clause E.1(a)) operate in a practical way? What is the purpose of Clause E.1(c)?

(vii) Having regard to the protective purpose of s.326, it is our provisional view that a deduction made pursuant to Clause E.1(c) may be ‘unreasonable in the circumstances’ within the meaning of s.326(1)(c)(ii), in the following respects:

1. The deduction permitted by Clause E.1(c) may be disproportionate to the loss suffered by the employer as a consequence of the employee not providing the notice required under Clause E.1(a).

To the extent that the purpose of the provision is compensatory Clause E.1(c) does not contain a mechanism for ensuring that the extent of the deduction is proportionate to the loss. The deduction permitted by the term may be as much as four weeks’ wages (for an employee with more than 5 years’ service) in circumstances where the employer suffers no loss at all.

This concern may be addressed by a variation to Clause E.1(c) to limit the deduction that can be made – such as, no more than one week’s wages.

2. Clause E.1(c) permits an employer to make a deduction from monies due to an employee on termination in circumstances where the employee ‘fails to give a period of notice required under paragraph (a)’. Clause E.1(a) provides that ‘An employee must give the employer written notice of termination in accordance with Table X’ (emphasis added). Clause E.1(c) may permit a deduction in circumstances where an employee has given the employer the requisite notice orally but not in writing.

This concern may be addressed by removing the requirement in Clause E.1(a) for notice of termination to be in writing.

3. Clause E.1(c) would allow an employer to make a deduction from monies due to an employee in circumstances where the employer has consented (or acquiesced) to an employee providing less than the required period of notice. For instance, an employee with more than 5 years’ service resigns. Clause E.1(a) provides that the employee must give the employer 4 weeks’ notice of termination. The employee wants to leave in 2 weeks, to take up another job. The employer agrees and accepts the reduced notice period. Despite that agreement, Clause E.1(c) would permit the employer to deduct 2 weeks’ pay from the money due to the employee on termination.

This concern may be addressed by an appropriate qualification to Clause E.1(c), such as:

‘No deduction can be made pursuant to Clause E.1(c) in circumstances where the employer has agreed to a shorter period of notice than that required in Clause E.1(a).’

4. Clause E.1(c) would allow an employer to make a deduction from monies due to an employee in circumstances where the employee may be unaware of the requirement in Clause E.1(a) to provide notice of termination. In this regard, we note NatRoad’s submission that ‘Most employees would not be aware of the risk of being in breach of the Award by not giving the required period of notice.’

We note that employers must give each employee the Fair Work Information Statement (the Statement) before, or as soon as practicable after, the employee starts employment (s.125(1)). This requirement forms part of the NES (see Division 12 of Pt 2-2: ss.124-125). The Statement must be prepared and published by the Fair Work Ombudsman (s.124(1)). The required content of the Statement is prescribed by the Act and Regulations (s.124(2) and Regulation 2.01) and must contain information, relevantly, about ‘termination of employment’ (s.124(2)(f)). The current version of the Statement was published on 1 July 2017. It does not contain any information about an employer’s capacity under an award to deduct amounts from termination monies payable to an employee because the employee has failed to give the required notice on resignation. The section of the Statement dealing with ‘Termination of employment’ provides:

‘Termination of employment can occur for a number of reasons, including redundancy, resignation and dismissal. When your employment relationship ends, you are entitled to receive any outstanding employment entitlements. This may include outstanding wages, payment in lieu of notice, payment for accrued annual leave and long service leave, and any applicable redundancy payments’.

To the extent that the purpose of Clause E.1(c) is to enhance compliance with Clause E.1(a) it seems axiomatic that employees must be made aware of the potential consequence of failing to provide the requisite notice. Absent such knowledge it is difficult to see how Clause E.1(c) can be said to encourage compliance with Clause E.1(a).

This concern may be addressed in the same manner as Issue 1. Alternatively, Clause E.1 may be varied to expressly provide that no deduction can be made pursuant to Clause E.1(c) unless the employer has informed the employee that a deduction may be made from monies due to the employee on termination in the event that the employee fails to give the period of notice required under Clause E.1(a).

[3] Interested persons are to file written submissions by 4.00 pm Monday 13 November 2017.

[4] Interested persons can file written submissions in reply by 4.00 pm Monday 27 November 2017.

[5] All written submissions should be sent to [email protected].

[6] The matter will be listed for hearing at 9.30am Friday, 15 December 2017.

[7] Liberty to apply.

PRESIDENT

 1  Standard clauses were identified in a statement of 20 July 2017 [2017] FWCFB 3745.

 2   [2017] FWCFB 4355.

 3   [2017] FWCFB 4355.

 4   [2017] FWCFB 5258.

 5   [2017] FWCFB 5258.

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